Standard & Poor’s and Moody’s Investors Service objected to European Union rules on conflicts of interest and disclosure of credit ratings in response to the past year’s market turmoil, reports Bloomberg’s John Rega. „S&P and Moody’s told the European Commission, the EU executive arm in Brussels, in statements today that detailed regulations may interfere with credit ratings. Instead, they urged the EU to rely on an international code of conduct.“

Financial Services Commissioner Charlie McCreevy is reportedly considering measures including special labels for structured- finance products, such as the mortgage-backed securities that helped spread losses on U.S. home loans. He’s also weighing requirements for rating firms to rotate staff and take other steps to safeguard analysts from influence by rated companies.

„While Moody’s does not object to enhanced regulatory oversight in the EU, we, like many market participants, believe changes to the commission’s proposal are needed to ensure it does not impair the efficient workings of the European and global capital markets,“ the company said in a statement.

The firms said they expect they will have to accept some formal supervision by registering with authorities. That’s a central point in the plan by the commission and the French government to step up oversight of credit ratings in response to the financial-market disruption of the past year, in which U.S. subprime mortgage defaults set off a rout in related securities that led to more than $500 billion of bank losses and writedowns.

„Standard & Poor’s recognizes the commission’s desire for additional external oversight of rating agencies and shares the commission’s aim of supporting the quality and transparency of ratings opinions,“ the company said in a statement. „The commission can best meet its objectives through a globally consistent solution“ based on the code of conduct written by regulators at the International Organization of Securities Commissions.

S&P is a unit of McGraw-Hill Cos. of New York. Moody’s is a unit of New York-based Moody’s Corp. The Securities Industry and Financial Markets Association backed the rating companies today, saying the commission’s July 31 proposals are too burdensome and may undermine confidence by giving authorities power to interfere with ratings.

„Imposing a prescriptive regime of the kind proposed“ won’t help ensure the independence, objectivity and quality of ratings, said Deborah Cunningham, senior portfolio manager for money markets and municipal bonds at Federated Investors Inc. and co-head of a Sifma task force on the issue.

The commission will analyze submissions to its consultation, which concluded Sept. 5, before shaping a formal legislative proposal in October, McCreevy’s spokesman, Oliver Drewes, said by telephone to John Rega. EU governments and the European Parliament would have to agree, in order to enact any measure. In a Bloomberg Television interview Sept. 5, McCreevy said the credit-rating companies must be „lightly regulated,“ and he will do what’s best even if companies disagree.